Tauranga Budget Advisory Service manager Diane Bruin said most people needing help at the service had some beneficiary debt.
"Clients normally get in debt because they have to get an advance to get in a home to rent or they have to get a grocery voucher when they're really struggling," she said.
"They don't get in debt because they're buying things on their Christmas wish list or anything like that."
The repayment rate was generally about $5 a week, she said.
"Clients see it as part and parcel of paying off all their debts. They generally have other debts from hire purchase, truck shops -- door-to-door sales of clothing, TVs, cellphones and other goods that go to vulnerable areas. And many have rent arrears."
Ms Bruin cautioned families about getting into more debt over the summer.
"Parents shouldn't buy up large at Christmas if they can't afford it. We've already received lots of presents for families that are in need so kids can still have some presents to open on Christmas.
"There's also plenty to do over the school holidays that doesn't cost much. Taking kids to the movies is horrendous. Instead, go to parks and beaches or have fun with the neighbour's kids. Having fun doesn't have to mean spending a lot."
Te Tuinga Whanau Support Services Trust director Tommy Wilson said servicing a $2000 or more benefit debt was the last priority for people who were living in poverty.
"Their main concern is having enough to feed themselves and their family," he said.
Mr Wilson said unpaid long-term debt led to bad credit ratings, which meant the debtor could not get a loan to pay for the bond to rent a property, or pay for other essentials items.
"A bad credit rating just amplifies the circle of poverty debtors are in and people feel hopeless and trapped, and can't see the light out of their desperate situation."
Mr Wilson said one solution would be for the Government to introduce a Kiwi Saver-type scheme for beneficiaries.
"Even putting $5 a week into it, that's $20 a month, would soon mount up and it would offer a bit of a safety net for people so they have some funds when they go off benefit," he said.
Mr Wilson also suggested the Government could consider wiping some of the debts of long-term beneficiaries so they had a fresh start when they rejoined the workforce.
Nationally, a total of $627,780,079 was owed by beneficiaries at the end of the financial year.
Almost 60 per cent of 18 to 64-year-olds on a main benefit were in debt.
Ministry of Social Development spokesman Carl Crafar said the ministry worked hard to "protect the integrity of the system to ensure it remains fair to all New Zealanders".
Clients could owe money to the ministry because of overpayment, "recoverable assistance" or as a result of being prosecuted for fraud. Recoverable assistance was a payment which helped people pay for something they needed urgently when they had no other way of paying for it, for example school uniforms or rent arrears.
Most overpayments occurred because clients failed to inform Work and Income of a change in their circumstances, such as accommodation costs, Mr Crafar said.
Avoiding debt at Christmas
* Presents don't have to be big and expensive. Make your own colourful vouchers for jobs you can do, eg, gardening, babysitting, washing a car or housekeeping.
* Never pay full price for anything. Look for sales.
* Secret Santa family-style. Get every family member to put their name into a hat and whoever's name is pulled out is the person you buy for and it's a present from the whole family.
* Anything can go on a Christmas tree: fake flowers, small plastic animals, children's crafts, etc.
* Make Christmas lunch or dinner potluck. The library has fantastic cook books with budget recipes.
